Liberalisation, FDI, and productivity spillovers--an analysis of Indian manufacturing firms

The objective of the intensification of reforms in India's trade,technology and industry policies in 1991 was to make Indianindustry competitive. In the light of these attempted changes,the present paper tested two hypotheses, namely (a) whetherliberalisation has improved the productivity of local firms;and (b) whether the spillovers from technology transfer haveincreased in the liberal regime. To test these, techniques frompanel data and stochastic production frontier were employedon 487 firms belonging to 24 three-digit manufacturing industriesfor the period 1989–90 to 1996–97. The results showedthat after liberalisation, the productivity of Indian industry,especially the foreign owned firms, has improved. The econometricresults suggested that only ‘scientific’ non-FDIfirms have benefited from the liberalisation. For the ‘non-scientific’firms, the impact is found to be productivity depressing. Withrespect to spillovers, only those domestic firms, which investedin R&D to decode the spilled knowledge, could benefit.     

Is Exchange Rate Volatility Symmetric to Oil Price Volatility? An Investigation for India

Journal of Quantitative Economics - The studies involving finding a relation between oil prices and the exchange rate have often looked the relationship when the oil price was rising. Will the...     

The effects of economic reforms on manufacturing dualism: Evidence from India

Dualism is a pervasive feature of the manufacturing sectors of less-developed countries, with large differences in productivity between the informal and the formal sectors. Policy distortions are viewed as an important factor behind the prevalence of manufacturing dualism. We examine whether tariff reforms, industrial de-licensing and the withdrawal of reservation of products for small firms implemented since the mid-1980s have had any effects on efficiency differentials between informal and formal firms in Indian manufacturing. We find strong evidence that economic reforms have exacerbated dualism by increasing the productivity differentials between the more efficient formal firms and the less efficient informal firms.